4-plex, heavy value-add!

[Cole Bennett]

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Lexington.

Purchase price: $103,000
Cash invested: $70,000

4-plex that was in terrible shape when we got it, in a rough but growing area near downtown Lexington. We put a lot of our own sweat equity into it: replaced radiator/window units with central HVAC in 3/4 units, new roof, new paint, tuckpointing, and major interior renovations of each apartment. Currently appraised for $350k. Our cashflow #'s are after all expenses (average maintenance, utilities, mortgage, etc.).

What made you interested in investing in this type of deal?

Haha, we bought this right after reading Rich Dad, Poor Dad. It was our first rental property, purchased while we were still renting ourselves.

How did you find this deal and how did you negotiate it?

We got pretty lucky with a very motivated seller, in a market where others were already looking out for great deals like this one we just happened to pop in right when it listed. We offered what the seller was asking.

How did you finance this deal?

Typical bank loan, 20% down. My wife is a pediatrician - this has always made things a little easier with banks.

How did you add value to the deal?

I renovated most of the units myself, as they came empty. We also had a new roof put on, had the exterior painted. We installed HVAC in 3 of the units and got them off the boiler and window AC units.

What was the outcome?

Currently appraised for $350k. Rents went from $1,200 to $2,900.

Lessons learned? Challenges?

I would have done more earlier. Been stricter about rent. Broken the large 3BR/1BA first floor into two units.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I don't think he lives in the area anymore!